The Nordic Welfare Model

Unveil the Mystery of Nordic Welfare Model: Features, Development and Its Implications for China 15 International Trade 王穗

Abstract

The Nordic Welfare Model is proven to be a benchmark. Many authoritative institutes have conducted comparative cross-country welfare system studies, in which Nordic countries ranked high in terms of employment, unemployment benefits, economic efficiency, the growth rate of economy, price stability and so forth. The unremarkable economic performance of Nordic countries arouses attractions from all around the world. Meanwhile, the challenges it’s confronted with nowadays are paid close attention. The sustainability of Nordic Model is put under a severe test given the increasingly complicated international economic

Introduction

The Nordic countries have been admired for their high social welfare, decent salary, high unemployment insurance and incredible balance between social equality and rapid economic growth. Those indexes, combined with some studies of economic and social performance give rise to its success among European countries. Its successful performance ensures social stability, economic growth, fair income distribution, uneventful labor market and strong social cohesion. Therefore, many other countries’ policy-makers are aspired to copy its success in their search of better welfare system.

On the other hand, the success of its model is invariably described as “the bumble-bee can fly”, which implies that the Nordic economies can thrive given the seemingly weak productivity incentives associated with a generous social security system, high tax wedges and a nonhierarchical distribution of income. Many critics in fiscal and finances fields have been looking for inward contradictions in the model and they have questioned its sustainability through a variety of hypothesis. Some people stand on the point that the success of Nordic Model was catalyzed by some temporary advantages and historical coincidences, whereby the impressive triumph can fade away easily over time, especially under the impact of globalization and greying population. Actually, the Nordic model has survived macroeconomic crisis in the 1990s and its efficiency and effectiveness have been restored to the normal

There is a mutually supportive interaction existing in the two elements: with collective risk sharing, globalization becomes more acceptable to citizens; while having large public sectors, the Nordic countries also embrace the market economy and competition.

2. The heyday of Nordic Welfare Model: Myth or Reality?

Even though it’s hard to believe for many people, the Nordic countries, which used to be the lands of Viking pirates in ancient times, have achieved a great success in social welfare and overall economic performance, even exceeding the United States and other European countries. Besides the explicit indexes such as employment rate, productivity levels, GDP per capita, the implicit parameters also proved its success. On the Index of Economic Freedom 2008, Denmark's rating is 11th highest of 162 countries (4th in Europe), Finland's 16th, and Sweden's 27th. The United Nations World Happiness Report 2013 shows that the happiest nations are concentrated in Northern Europe. The Nordics ranked highest on the metrics of real GDP per capita, healthy life expectancy, having someone to count on, perceived freedom to make life choices, generosity and freedom from